Conditional Grant and Capital Expenditure

Public Hearings

11 October 2005

Outline

• Receipts

• Transfers

• Monitoring transfers

• Division of Revenue Act

• Expenditure

• Monitoring expenditure

• The way forward

Receipts

Receipts• Conditional grants form 33,1 per cent of Provincial

budget in 2005/06• DORA result in a number of difficulties for Province,

mainly as a result of withholding of grants• Withholding mainly results from late submission or

late approval of business plans in contradiction to deadlines given in CG frameworks

• Implications of withholding funds on provincial expenditure and cash flow management results in Province having to contain expenditure to match receipts

Transfers

Transfers

Social DevelopmentHIV and Aids Community Based Care - - 3 654 16 16 3 654 - - - -Social Assistance Admin 19 686 1 1 19 686 19 686 6 6 19 686 19 686 3 3 19 686 19 686 1 1 19 686Social Assistance Grants 650 119 660 386 278 306 6&27 6&27 276 189 329 353 2&27 1&27 331 982 331 055 1&27 1&27 344 438Soc. Intergrated Social Grant - - - - 10 017 2 1 10 017 - -HealthNTSG 101 224 20 - 101 224 18 25 202 448 101 224 15 15 101 224 101 224 20 20 101 224HPTDG 26 940 20 - 26 940 18 25 53 880 26 940 15 15 26 940 26 940 20 20 26 940Hospital Revitalisation 14 342 20 - 14 336 18 25 28 678 14 336 15 15 14 336 14 336 20 20 14 336Hospital Mngt and Quality 4 402 20 - - 25 4 402 - - 4 402 20 21 4 402INP 1 360 20 - - 10 1 360 - - 1 330 20 -Comprehansive HIV and Aids 6 805 20 - 6 805 18 - 6 805 15 - 8 418 20 -HousingIntergrated Housing 54 027 8 22 54 027 51 710 6 5 51 710 38 116 3 3 38 116 32 326 8 5 32 326Human settlement 1 207 21 - 580 23 3&27 1 787 783 21 - 742 21 6&22 1 525Transport and Public WorksPIG - - 57 212 13 - - 9 7 438 - 5 49 774EducationHIV and Aids Life Skills Education 2 799 15 - - 17 2 799 - - 2 799 15 15 2 799PSNP 10 034 15 15 10 034 - - - - 10 034 15 15 10 034AgricultureCASP 1 721 11 13 1 721 - - - - 6 022 11 12 6 022Land care grant 250 11 13 250 - - - - 875 11 12 875Culural affairs and sportSport Mass Participation Programme 1 575 25 25 1 575 - - - - 552 25 26 552Total 896 491 747 679 560 453 646 593 547 260 549 739 560 741 614 933

SCHEDULE RECEIVED SCHEDULE RECEIVEDSCHEDULE RECEIVED SCHEDULE RECEIVEDPAYMENT ACTUAL PAYMENT ACTUALPAYMENT ACTUAL PAYMENT ACTUAL

APRIL MAY JUNE JULY

Reconciliation of Conditional Grant Payment Schedule

Transfers (2)Health grants

– No transfers received in April– Payment made for NTSG, HPTDG, HRP in May albeit late– First payment for Comprehensive HIV and Aids Grant received in August

• Housing– IHAHSD April transfer received late – Human Human settlement and redevelopment grant withheld in April, May

and June

• Provincial Infrastructure Grant– Transfer due in May, received in June and July

• Education– HIV and Aids (Life Skills Education) Grant due in April transferred in May

• Resultant loss in revenue R3,471 million

Monitoring transfers

Monitoring transfers

• No formalised intergovernmental process for monitoring transfers

• Cash management receives transfers – only aware of intention to withhold transfer on day transfer expected as per payment schedule

• Contact relevant department and resolve situation• PT has now recommended more formalised

process to NT to ensure PT alerted of intention to withhold funds timeously (discussed later)

Division of Revenue Act

Division of Revenue Act

• Shortcomings in Division of Revenue Process– Section 33(2) requires National Departments to notify

receiving officers of intention to withhold transfers, providing opportunity for Departments to submit reasons as to why allocation should not be withheld

– No requirement for Provincial Treasuries (PT) to be informed while NT only needs to be informed if funds are to be withheld for more than 30 days

Division of Revenue Act (2)

• Further shortcomings– Administrative burden of negligible grants i.e.

Land care grant R2,5 million with numerous reports required

– Overlapping of measurable outputs– PT forced to approve rollover requests on CG

even though under spending is imminent– Conditions of grants limit flexibility

Division of Revenue Act (3)

• PT submitted a letter to NT recommending that NT– Submit monthly reports to PT indicating which CGs

will be withheld and motivation for withholding

– Submit revised payment schedules to PT

– Advise PTs as to when Provincial Departments have met requirements of CG frameworks

• These recommendations have subsequently been taken up in a practice note

Division of Revenue Act (4)• PT has also recommended that PTs should play an

oversight role in the development of 2006/07 business plans, thereby ensuring business plans are approved timeously thereby ensuring no repeat of the problems encountered in 2005/06.

• Recommended procedure includes– National Departments submit schedules for completion of

business plans, preferred formats as well as names of persons responsible for drafting business plans to NT

– NT compiles this information and forwards it to relevant PTs– National Departments inform their provincial counterparts of

PTs oversight role

Expenditure

Expenditure

ProjectionSpent &

Projection Budget Deviation

R'000 % R'000 R'000 R'000 R'000

Comprehensive Agricultural Support Programme 3,374 19.61% 13,832 17,206 17,206 -

Land Care Programme Grant 67 2.68% 2,433 2,500 2,500 -

Provincial Infrastructure 1,215 4.47% 24,617 25,832 25,832 -

Spent by Province

Agriculture – CG Expenditure as at 30 June 2005

Reasons for under-expenditure

•Land Care

- Slow start up in spending

•PIG

- Lack of community participation and agreement on projects

- Prolonged tendering process

Expenditure (2)

ProjectionSpent &

Projection Budget Deviation

R'000 % R'000 R'000 R'000 R'000

HIV and Aids (Life Skills Education) 1,291 11.53% 9,907 11,198 11,198 -

National School Nutrition Programme 1,711 4.26% 38,424 40,135 40,135 -

Provincial Infrastructure 7,489 13.45% 47,740 55,229 55,229 -

Spent by Province

Education – CG Expenditure as at 30 June 2005

Reasons for under-expenditure•HIV and Aids (Life Skills Education)

- Expenditure slow in first quarter and picks up in third quarter when learner materials are purchased for following school year

- Late approval of business plan

•National School Nutrition Plan

- Delay is submission of claims by service providers results in slow payment by department

•PIG

- Weather conditions delaying construction – usually slow in first quarter, gathering steam later in the year

Expenditure (3)

ProjectionSpent &

Projection Budget Deviation

R'000 % R'000 R'000 R'000 R'000

Comprehensive HIV and Aids 18,154 22.02% 64,297 82,451 82,451 -

Health Professions Training and Development 80,819 25.00% 242,459 323,278 323,278 -

Hospital Management and Quality Improvement 2,297 13.05% 15,311 17,608 17,608 -

Hospital Revitalisation 21,175 12.31% 150,863 172,038 172,038 -

Integrated Nutrition Programme 388 7.34% 4,900 5,288 5,288 -

National Tertiary Services 303,671 25.00% 911,013 1,214,684 1,214,684 -

Provincial Infrastructure 3,172 5.74% 52,057 55,229 55,229 -

Spent by Province

Health – CG Expenditure as at 30 June 2005

Reasons for under expenditure

•Hospital management and quality improvement

- Budget split between items was not allocated on BAS by 1 April for payments to be made against expenditure items

•Comprehensive HIV and Aids

-Late approval of business plan

Expenditure (4)

• Hospital Revitalisation Programme

– Difficulties with Vredenburg project, part of which must go out on tender

– Delay in approval in Paarl hospital business case

• PIG

– Weather conditions delaying construction – usually slow in first quarter, gathering steam later in the year

Expenditure (5)

ProjectionSpent &

Projection Budget Deviation

R'000 % R'000 R'000 R'000 R'000

Housing

Integrated Housing and Human Settlement Development 53,452 11.70% 397,486 450,938 456,740 -5,802

Human Settlement and Redevelopment 319 3.40% 8,352 8,671 9,373 -702

Spent by Province

Housing – CG Expenditure as at 30 June 2005

Reasons for under expenditure•Weather conditions delaying construction – usually slow in first quarter, gathering steam later in the year

•Late submission of claims by municipalities

Expenditure (6)

ProjectionSpent &

Projection Budget Deviation

R'000 % R'000 R'000 R'000 R'000

HIV and Aids (Community-Based Care) 1 0.02% 6,088 6,089 6,089 -

Integrated Social Development Services 27 0.13% 20,007 20,034 20,034 -

Social Assistance Administration 29,335 12.42% 193,333 222,668 236,234 -13,566

Social Assistance Transfers 965,233 24.11% 3,047,169 4,012,402 4,002,671 9,731

Spent by Province

Social services and poverty alleviation: CG Expenditure as at 30 June 2005

Reasons for under expenditure•HIV and Aids (Community Based Care)

- Spending focused on the appraisal of service proposals and the consolidation of partnerships, spending will pick up once this process is complete

Expenditure (7)

• Integrated Social Development Services

– Previously called Food Emergency Relief Grant – tender has now been approved – spending will commence shortly

– Business plan for Integrated Social Development Services Grant has only been approved recently which will improve spending in the remainder of the financial year

• Social Assistance Administration

– Establishment for support services staff for SASSA has not been approved by National Department of Social Development

– Social Services pay administrative costs and claim back from SASSA – spending in second quarter will improve

Expenditure (8)

Transport and public works: CG Expenditure as at 30 June 2005

Reasons for under expenditure

•Weather conditions delaying construction – usually slow in first quarter, gathering steam later in the year

Projection

Spent & Projectio

n BudgetDeviatio

nR'000 % R'000 R'000 R'000 R'000

Provincial infrastructure 14,647 17.79% 77,910 92,557 92,557 -

Spent by Province

Expenditure (9)

ProjectionSpent &

Projection Budget Deviation

R'000 % R'000 R'000 R'000 R'000

Mass Sport and Recreation Participation Programme 204 7.64% 2,466 2,670 2,670 -

Spent by Province

Cultural Affairs and Sport: CG Expenditure as at 30 June 2005

Reasons for under expenditure

•Most of the events funded by the grant take place towards the end of the year

•Non/late-filling of vacant posts

Expenditure (10)

ProjectionSpent &

Projection Budget Deviation

R'000 % R'000 R'000 R'000 R'000

Payments for capital assets 200,144 13.86% 1,236,396 1,436,540 1,443,962 -7,422

Spent by Province

Capital expenditure as at 30 June 2005

Reasons for under expenditure• Weather conditions delaying construction – usually slow in first

quarter, gathering steam later in the year

• Long Supply Chain Management (SCM) Processes

• Paradigm shift need to take place in depts - start with SCM process in the previous financial year as part of the MTEC 3 year budget allocations

Monitoring Expenditure

Monitoring expenditure

• Monthly reports to NT• Quarterly reports to Top Management, Exco and

Legislature (SCOF)• Quarterly narrative reports to AOs and CFOs• Frequent interaction with departments on spending

performance and general issues• Trawling exercise allows for shifting of PIG funds

between departments i.e. from performing to non-performing departments

The Way Forward

The way forward

• PT will have one day workshop on DORA and CG frameworks to streamline DORA in order to enhance delivery at provincial level

• Outcomes to be communicated to NT• Financial and non-financial quarterly reports to

Legislature, Exco and Top Management to inform engagement with departments

• Paradigm shifts need to take place in depts regarding SCM – process to start earlier as part of 3 year allocations.

Questions